COVID-19, Government Transfer Payments, and Investment Decisions in Farming Business: Evidence from Northern India.

Although the COVID-19 pandemic resulted in about a 24% decline in India's GDP during the April-June 2020 quarter, the nation's agricultural sector, somewhat surprisingly, seems to have done remarkably well. This paper examines whether the public transfer program Pradhan Mantri Garib Kalyan Yojana (PMGKY), announced immediately after the lockdown, benefited farmers in dealing with the COVID shock. Overall, 95% of the smallholders received support from at least one of PMGKY's four components. Direct cash transfers had significantly more impact than in-kind transfer schemes. The result shows that farmers receiving cash transfers under PM-KISAN, one component of PMGKY, were more likely to invest in buying seeds. In contrast, farmers receiving cash transfers under PM-UY, another piece of PMGKY, were more likely to invest in fertilizer and pesticides. Finally, smallholders who received benefits from all four components of PMGKY were more likely to invest in purchasing seeds, fertilizer, and pesticides. Findings suggest the fungibility of public cash transfers from the recent PMGKY scheme is significant in alleviating credit constraints and increasing future investments in modern inputs.

India's COVID-19 social assistance package and its impact on the agriculture sector.

Context: CVOID-19 induced significant economic and social disruptions in India. Rural households, including smallholders, were affected by loss in migrant income, livelihood and farm and non-farm incomes. During this lockdown, the Indian government enacted several emergency legislations to provide direct and indirect relief to workers and households. India's COVID-19 social assistance package, namely, PM-GKY, announced in March 2020, was designed to provide immediate relief to the vulnerable population. The PM-GKY provided cash direct benefit transfers (DBT) and in-kind supports (IKS) through existing schemes. Objectives: This study examines the impact of India's government assistance package (known as Pradhan Mantri Garib Kalyan Yojana or PM-GKY), announced immediately after the COVID-19 lockdown, on the procurement of agricultural inputs for the upcoming farming season. Methods: The study uses a quasi-experimental method and survey data from 1,789 smallholder households in three northern Indian states (Rajasthan, Madhya Pradesh, and Uttar Pradesh). Results: The result suggests that the fungibility of funds received under the government transfer package was significant in alleviating credit constraints and increasing agricultural investments in agricultural inputs. The farmers who received benefits from the PM-GKY scheme spent significantly more on the procurement of seeds, fertilizers, and pesticides. Conclusions: The disbursement of cash transfers in the three states showed that emergency relief packages had reached the vulnerable sections of Indian society. Overall, 89-94% of households benefited from direct cash transfers. Perhaps lower transaction costs, minimal leakages, and immediate delivery make a strong case for direct cash transfers. The above advantages facilitate the provision of relief to a large proportion of vulnerable sections of Indian society in a short period.